John Maynard Keynes' School of Thought

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Keynes II: His School of Thought

By the end of World War I, Keynes' belief in classical (liberal) economics began to show signs of stress. First of all, he was irritated at the treatment of Germany at Versailles, especially as it concerned the French expropriation of Germany industry. Second, he saw new ideologies developing that were to challenge liberalism in nearly all its forms.

Third, the very trend of success in Hitler's Germany and Stalin's USSR, despite the costs, was not a very good precedent for the 20th century. To put it succinctly, JMK writes in the concluding part of his General Theory on Employment, Interest and Money:

Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world. But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards. If we suppose the volume of output is to be determined by forces outside the classical ...